Pfizer to buy Wyeth for $68 billion, cut jobs

January 26, 2009

NEW YORK (AP) Â? Pfizer Inc., the world's largest drugmaker, will pay $68 billion for rival Wyeth in a move that will consolidate two of the industry's largest drug developers.

The deal comes as Pfizer's profit takes a brutal hit from a $2.3 billion legal settlement over allegations it marketed certain products off-label, or for indications they are not yet approved. The New York-based company is also cutting 10 percent of its work force, slashing its dividend, and reducing the number of manufacturing sites.

Early Monday, Pfizer, the maker of Lipitor and Viagra, said it will pay $50.19 per share under for Wyeth, valuing Madison, N.J.-based Wyeth at a 14.7 percent premium to the company's closing price of $43.74 Friday.

Both companies' boards of directors approved the deal.

Pfizer has been under pressure from Wall Street to make a bold move as it faces what the is referred to as a patent cliff in the coming years. As key drugs lose patent protection they will face generic competition and declining sales. The world's top-selling drug, the cholesterol treatment Lipitor, faces generic competition starting in November 2011. It brings in about $13 billion per year for the company.

"The combination of Pfizer and Wyeth provides a powerful opportunity to transform our industry," Pfizer Chairman and Chief Executive Jeffery B. Kindler said in a statement. "It will produce the world's premier biopharmaceutical company whose distinct blend of diversification, flexibility, and scale positions it for success in a dynamic global health care environment."

Pfizer has its research and development headquarters in Connecticut, in New London and Groton.

Shortly after announcing the Wyeth deal, Pfizer said fourth-quarter profit plunged on a charge to settle investigations into off-label marketing practices. The company earned $268 million, or 4 cents per share, compared with profit of $2.72 billion, or 40 cents per share, a year prior. Revenue fell 4 percent to $12.35 billion from $12.87 billion.

Excluding about $2.3 billion in legal charges, the company says profit rose to 65 cents per share.